What are exempt and nonexempt employees?

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Exempt employees are not eligible for overtime or minimum wage and are not paid additional wages for working more than 40 hours a week, according to salary and negotiation expert Paul Barada for Monster. Nonexempt employees are paid for every hour they work and are better protected by federal law, such as the Fair Labor Standards Act.

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Instead of earning wages for every hour of work, exempt employees are paid a salary, notes Barada. Examples of common exempt positions include professional, supervisory and executive positions. When nonexempt employees are paid overtime for working more than 40 hours within a work week, it cannot be less than 1 1/2 times their regular hourly wage.

Both exempt and nonexempt employees are taxed the same, explains Barada. The only potential difference is the tax bracket an employee falls under according to how much he earns within a single tax year. Even though nonexempt employees are better protected by federal law, a majority of employers treat both kinds of employees the same. Another similarity between the two is they are both eligible for unemployment benefits.

An employee deciding on whether to be exempt or nonexempt should determine whether he wants to receive wages for every hour he works, states Barada. Employees should also ask themselves if they are fine with having their time and activities closely scrutinized by their boss.